EconPapers    
Economics at your fingertips  
 

The Distribution of Uncertainty: Evidence from the VIX Options Market

Clemens Völkert

Journal of Futures Markets, 2015, vol. 35, issue 7, 597-624

Abstract: This article investigates the informational content implied in the risk‐neutral distribution of the VIX, a leading barometer of economic uncertainty. We extract the risk‐neutral distribution from VIX option prices over the sample period from 2006 to 2011 using a non‐parametric approach. We analyze the time‐series behavior of the option‐implied moments and assess whether the information implied in the risk‐neutral distribution has predictive power. The risk‐neutral distribution considerably changed shape during the financial crisis. Furthermore, risk‐neutral moments contain useful information with respect to the likelihood of upward jumps in volatility. Consistent with investors disliking high levels of economic uncertainty, we find that the overall shape of the estimated volatility pricing kernel is increasing. For certain periods, there is a puzzling U‐shape. The behavior of the volatility pricing kernel over time reveals that the financial crisis has affected investors’ attitudes towards risk. © 2014 Wiley Periodicals, Inc. Jrl Fut Mark 35:597–624, 2015

Date: 2015
References: Add references at CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://hdl.handle.net/

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wly:jfutmk:v:35:y:2015:i:7:p:597-624

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0270-7314

Access Statistics for this article

Journal of Futures Markets is currently edited by Robert I. Webb

More articles in Journal of Futures Markets from John Wiley & Sons, Ltd.
Bibliographic data for series maintained by Wiley Content Delivery ().

 
Page updated 2019-03-19
Handle: RePEc:wly:jfutmk:v:35:y:2015:i:7:p:597-624